July 2022 Summaries

Lago offers a comprehensive billing solution that caters to companies with subscription-based, usage-based, or hybrid pricing models, emphasizing the importance of an efficient invoice generation engine. The engine, built with teamwork from design and engineering teams using the Gotenberg library, generates PDF invoices asynchronously, storing them on Amazon S3 to ensure scalability and cost efficiency. Users can update organizational information, including tax rates and contact details, through a user interface or API, and Lago automatically calculates customer dues at the end of each billing period based on events and charges defined in the plan model. The system generates invoice payloads that can integrate with third-party tools like QuickBooks and NetSuite, while ensuring each invoice's uniqueness through sequential IDs and unique numbers. Invoices can be downloaded directly via the interface or API, and their statuses—pending, failed, or succeeded—can be updated in real-time, with automatic payment status retrieval through native integrations with payment service providers.

Stripe’s public pricing, as of July 2022, can be difficult for SaaS companies to quantify because its payment-processing fees may be supplemented by charges for a broad suite of related products, including billing, invoicing, revenue recognition, checkout, and Connect. The analysis describes how B2B SaaS businesses may combine several Stripe services to support subscriptions, while vertical SaaS platforms may incur additional Connect fees to route customer payments to merchants. Beyond direct fees, it highlights engineering and operational costs associated with implementing Stripe’s broader product suite and argues that using Stripe Billing can limit connections to alternative payment providers, potentially increasing switching costs and reducing leverage in fee negotiations. While recognizing Stripe’s payment API as highly regarded, the authors advocate for payment and billing infrastructure that supports multiple providers, citing gateway-agnostic tools and their own open-source billing API as alternatives to a closed ecosystem.

The founders of Lago, originally seeking to create a data tool they had desired during their time at fintech company Qonto, discovered through user feedback and market iterations that their product did not align with the needs of most growth teams, prompting a strategic pivot. Despite the lack of support for pivots within the European startup ecosystem, which often stigmatizes such changes as failures, they managed to realign their focus and develop an open-source billing alternative to Stripe, emphasizing market resilience and founder motivation as critical criteria in their decision-making process. They candidly communicated with their team and investors about the pivot, finding more understanding and support from U.S.-based investors who viewed pivoting as a natural part of startup growth. The founders highlighted the importance of a supportive network, referencing successful companies that have thrived post-pivot, and argued that embracing pivots is crucial for the survival and success of European tech companies, especially during economic downturns, to avoid missing out on creating the next major success story.